Category: News

As the Supreme Court’s Halo decision[1] recently celebrated its first anniversary, we take a look to see whether the lower courts have effectively rooted out the “wanton and malicious pirates” about whom the unanimous High Court was so gravely concerned. Have we found and singled out our swash-buckling ne’er-do-wells for public shaming, or have we discovered that the label, if defined by the reduced willfulness standard set out in Halo, might suggest that even some of the best-intentioned among us might be keeping parrots in their desk drawers and their closets well-stocked with puffy shirts? And importantly, what can we do to trade those bandannas for halos in the eyes of the court?

Recap

In Halo v. Pulse,[2] the Supreme Court made it easier for a patentee to obtain enhanced damages from a willful infringer under 35 U.S.C. § 284. The Court rejected a part of the previous requirement, under Seagate,[3] in which the patentee had to show that the infringer acted “objectively recklessly.” It also lowered the burden of proof from “clear and convincing” to “preponderance of the evidence.” In practice, the old standard allowed even willful infringers to escape liability for enhanced damages if they could come up with a reasonable non-infringement position even as late as during litigation. The Court felt that this standard was too rigorous. It ratcheted back the necessary showing to, essentially, “egregiousness,” which is centered on the subjective knowledge, intent, and behavior of the infringer.

To that end, courts will consider the nine so-called Read factors[4] in considering whether to award enhanced damages. In terms of guiding behavior outside the context of a specific dispute or litigation, three of these factors are most salient here:

Read Factor #2: Whether the infringer, upon knowing of the patent, investigated the scope of the patent and formed a good faith belief that it was invalid or that it was not infringed.

Read Factor #7: Remedial action taken by the infringer.

Enhanced Damages After Halo

If one pattern clearly emerges, it is that courts disfavor infringers who “know” about a patent but do not conduct an analysis of the scope of its claims (Read factor #2). Mere knowledge of a patent is generally not sufficient in itself to find willfulness, but knowledge in combination with copying and malicious intent, with no investigation, has proven extremely dangerous.

In Dominion v. Alstom, a Pennsylvania district court found that seven of the nine Read factors weighed in favor of enhanced damages against the defendant.[5] The court doubled the reasonable royalty findings to $972,000. The court found evidence of copying over a long period of time and took particular issue with the fact that “Alstom’s belief it did not infringe . . . is based entirely on the opinion of people without expertise in reading patent claims. On balance, it is not a good faith belief in non-infringement.”[6] The court noted that Halo played a role here and may have ultimately led to Alstom’s downfall. During the course of infringement, Alstom was operating in a Seagate world where an infringer can avoid enhanced damages if they can “muster a reasonable (even though unsuccessful) defense at the infringement trial.” But the Halo ruling did away with that post hoc safe harbor and essentially requires a good faith belief of non-infringement during the actual period of infringement.

In Imperium IP Holdings v. Samsung, an Eastern District of Texas court tripled jury verdict damages to nearly $21 million due to willfulness, the maximum enhancement allowed. The crux of the decision was that, “despite knowing of Plaintiff’s patents since at least April 2011, Defendants never undertook any serious investigation to form a good-faith belief as to non-infringement or invalidity.”[7] In deciding Samsung’s JMOL motion, the court reiterated that “evidence offered at trial established that Defendants had pre-suit knowledge of the patents-in-suit and took no steps to avoid infringement after becoming aware of the patents.”[8]

SRI International v. Cisco Systems also involved large damages numbers.[9] There, the Delaware trial court doubled the jury’s damages verdict to award more than $46 million to the plaintiff. Again, the court was swayed by a finding that the defendant did not perform a sufficient analysis of known patents, noting that evidence showed “that key Cisco employees did not read the patents-in-suit until their depositions.” The fact that Cisco knew about the asserted patents but did not investigate the technical aspects relating to infringement led to more than $23 million in additional damages.

How have defendants avoided enhanced damages?

Here is where the contrast becomes sharp. Even in cases where the Read factors might suggest some troublesome behavior, like knowing and intentional copying, defendants were spared enhanced damages because they made a reasonable investigation at the time of infringement.

In Greatbatch Ltd. v. AVX Corp.,[10] a Delaware district court found no willfulness in relation to three patents infringed by AVX. Even though AVX knew about all three patents at the time of the culpable activity, the court held that the conduct was not egregious or wanton because AVX performed a reasonable investigation at the time. The court distinguished a Federal Circuit case in which enhanced damages were awarded by noting that “here, by contrast, AVX sought and obtained invalidity and non-infringement opinions of counsel before litigation and developed designs and processes to avoid infringement” (court’s emphasis).[11] AVX relied upon opinions of counsel with respect to two of the three asserted patents, and “made significant efforts to avoid infringement of the [third] patent” (i.e., design around) according to the court.

In another remarkable case, Sociedad Espanola de Electromedicina y Calidad v. Blue Ridge X-Ray Co.,[12] the jury explicitly found that the defendants “knowingly and intentionally copied Sedecal’s transformer,” and the court upheld a finding of willful infringement.[13] However, the trial court has discretion to award enhanced damages even when infringement conduct is egregious and willful. Using this discretion, the court appreciated that the defendants “conducted a reasonable investigation of Sedecal’s patent claims and made a good faith determination that the patent was not infringed by their activities and that the patent was likely invalid,” and did not enhance damages. In other words, the defendants here blatantly copied the plaintiff’s product but escaped increased willfulness liability because they made the pre-suit effort to formulate reasonable (though ultimately incorrect) non-infringement positions. In this case, the pre-litigation investigation was conducted by a head engineer.

Similarly, in Koninklijke Philips v. Zoll Medical,[14] a plaintiff’s request for enhanced willfulness damages was rejected on summary judgment because the defendant had evaluated the asserted patents before the lawsuit and established a reasonable non-infringement position. After a portion of the case was appealed, the court quoted the Federal Circuit’s binding finding “that [although] Zoll’s claim construction argument against the jury’s direct infringement verdict . . . was incorrect, [its] argument was based on a reasonable interpretation of the claims in light of the specification and the prosecution history. . . . [T]his belief in non-infringement was reasonable . . . .”

Conclusion

An important practical result here is that Halo has effectively shifted the point in time at which an accused infringer should establish reasonable non-infringement or invalidity positions. We can no longer rely upon arguments that were first conjured up after being sued. By and large, future patent defendants stand a good chance of avoiding enhanced damages if they have a process in place to competently evaluate asserted patents at an early stage. They should have systems to collect relevant information such as analysis, documents, technical information, and relevant discussions in order to bolster a good faith belief of non-infringement or invalidity. That, or else they may find themselves walking the plank.

[4] The Read factors include: (1) whether the infringer deliberately copied the patentee’s ideas or design; (2) whether the infringer, upon knowing of the patent, investigated the scope of the patent and formed a good faith belief that it was invalid or that it was not infringed; (3) the infringer’s litigation behavior; (4) the infringer’s size and financial condition; (5) the closeness of the case; (6) the duration of the infringer’s misconduct; (7) remedial action taken by the infringer; (8) the infringer’s motivation for harm; and (9) whether the infringer attempted to conceal its misconduct. See Read Corp. v. Portec, Inc., 970 F.2d 816, 826-27 (Fed. Cir. 1992).

Share this:

ClearstoneIP is proud to announce the beta release of its next generation freedom-to-operate management platform, Clearstone FTO. With guidance and feedback from IP industry leaders, we’ve infused this new web-based application with the ideal combination of best practices, workflows, and collaboration features to bring much-needed efficiency to a critical process.

Some of the core features of the platform include:

Product-focused organization of FTO reviews – all reviews for a product easily locatable in one place.

Patent history review – easily see what decisions were made on a patent, in any prior review and any other product.

Customizable reporting – user-configurable to report the most essential information.

With state-of-the-art security features, Clearstone FTO makes it simple and safe to access vital information from anywhere. It’s an intuitive and powerful approach to manage and interact with information that was previously relegated to hundreds of spreadsheets scattered throughout organizations.

Share this:

The Federal Circuit’s recent decision in Enfish v. Microsoft Corp. was significant in that it was the first time that the court reversed a trial court’s finding of invalidity under § 101 based on the Supreme Court’s Alice decision, and only the second time that it upheld validity under that section post-Alice (the first being DDR Holdings v. Hotels.com).

The opinion was well-received by the patent bar, and the software industry in particular, as powerful precedent that can be used to fight rejections by the USPTO, defend counterclaims of invalidity in court, and otherwise strengthen the value of software patents. While the line between eligible and ineligible subject matter has become somewhat clearer, there is still ambiguity in certain areas, and questions exist regarding practical implications.

The Claimed Invention

Enfish involved patent claims directed to a “self-referential” database. The court referred to the following representative claim:

A data storage and retrieval system for a computer memory, comprising:

means for configuring said memory according to a logical table, said logical table including:

a plurality of logical rows, each said logical row including an object identification number (OID) to identify each said logical row, each said logical row corresponding to a record of information;

a plurality of logical columns intersecting said plurality of logical rows to define a plurality of logical cells, each said logical column including an OID to identify each said logical column; and

means for indexing data stored in said table.

Enfish’s “self-referential database”

The court referred to the invention generally as “an innovative logical model for a computer database.” The primary contribution to the art of the invention was the “self-referential” aspect, which purportedly avoided the need in conventional “relational database model” systems to define and maintain many separate tables. Instead, the claimed invention can store the pertinent information in a single table. According to the patents, the new approach improved searching efficiency and resulted in more-effective storage of unstructured data.

The Court’s Reasoning

The court began with the two-step analysis set forth in Alice and prior cases, in which the first step determines whether the claims are directed to a patent-ineligible concept, such as an abstract idea, and the second step considers whether the particular elements of the claims transform the nature of the claim into a patent-eligible application.

There is no doubt that the Federal Circuit took aim at some of the more egregious gaps that Alice left open. Primary among these gaps was the perceived Alice takeaway that there was no real limit on the height of abstraction that can be carried out on software claims in step one. In other words, one could conclude from Alice, and courts often did conclude, that a software claim is abstract if it can be summarized into something reasonably conventional, specific claim limitations be damned.

Enfish at least partly rectified this misconception by recognizing that “[t]he ‘directed to’ inquiry, therefore, cannot simply ask whether the claims involve a patent-ineligible concept, because essentially every routinely patent-eligible claim involving physical products and actions involves a law of nature and/or natural phenomenon—after all, they take place in the physical world.” Further, “describing the claims at such a high level of abstraction and untethered from the language of the claims all but ensures that the exceptions to § 101 swallow the rule.” Instead, claims must be considered as a whole and in light of the specification.

Accordingly, the Enfish panel carefully considered each element of the claims, including applying § 112, sixth paragraph, to interpret means-plus-function limitations, and examined the patent specification to both (i) shed light on the claim language; and (ii) express the advantages of the claimed invention over the prior art.

The court ultimately held that the relevant question is “whether the claims are directed to an improvement to computer functionality versus being directed to an abstract idea.” It concluded that the claimed self-referential database logic model is “a specific type of data structure designed to improve the way a computer stores and retrieves data in memory” and is therefore not an abstract idea. Having satisfied the first step of the Alice inquiry in the patentholder’s favor, the court did not need to address step two.

The Enfish holding gives teeth to the first step of the Alice inquiry and requires that the analysis take into consideration the nature of the invention and how it affects computer capabilities. In cases where the claims simply add conventional computer components to “well-known business practices,” they might be more likely to be found abstract under step one of the Alice inquiry.

Implications

Enfish is certainly a useful precedent for owners and seekers of software patents and should serve to strengthen patents as a general matter, but it does not (and cannot) fix the real havoc that was wreaked by the Supreme Court in Alice. Namely, the biggest problem with Alice is that it conflated and blurred the lines between questions of eligibility and those of prior art (i.e., novelty and obviousness).

Questions as to whether a claimed idea is “conventional,” “well known,” or is a “fundamental practice” have no place in an abstractness inquiry. These are questions that can be answered only by proving the existence or absence of prior art, not by some common sense-based purely mental exercise. Whether a claimed invention is abstract or practical is completely independent of novelty. The “abstractness” question should rely predominantly, if not entirely, on an isolated analysis of the actual features of the invention and whether it has some technical or practical component that makes it more than a mere idea in the ether. But that is a battle for another day, and one which the Federal Circuit does not appear to have the authority to fight until Alice is overturned or distinguished by future Supreme Court decisions.

Share this:

What a week! Our first trip to Legaltech was a whirlwind, but a ton of fun. It was amazing to meet so many people who are excited about new ways that technology can improve our work in the legal industry. The show took place at the Hilton NY Midtown on Feb. 2-4. With thousands of attendees and hundreds of exhibitors, Legaltech is the largest trade show in the industry.

First we’d like to thank ALM, the organizer of the huge show, and the Stanford CodeX Center for inviting us to exhibit as part of the much-buzzed-about CodeX Pavilion. It was an honor to be part of such an amazing group of innovators (keep an eye out for Casetext – these guys are doing amazing things by crowd-sourcing legal commentary in a free research platform!).

Our exhibit attracted a lot of attention from patent professionals, press, and tech aficionados alike. Here is Jesse being interviewed by Larry Port of Rocket Matter:

We also had the privilege to participate in CodeX’s Legal Disruption Pitch Lightning Round, where we presented ClearstoneIP in front of a packed ballroom.

Share this:

ClearstoneIP announces the launch of a pilot testing program for its new web application, Clearstone Elements™. The pilot program is slated to begin in November 2014 and run until Spring 2015. Clearstone Elements™ will apply ClearstoneIP’s revolutionary claims-based patent analysis platform to the field of arterial stent technology. Approved pilot group testers will be granted unlimited, free access to the Clearstone Elements™ software for the duration of the program.

Pilot Group Applicants Requested

Pilot testers will be the first to experience this groundbreaking patent analysis tool, which enables users to conduct clearance, infringement, and other claim-coverage-based analyses against all patents existing in released patent collections. The first patent collection will contain the approximately 1,200 U.S. patents assigned to Boston Scientific SciMed, Inc. that are classified in USPC 623/1.1 through 1.54 (relating to “Arterial Prosthesis”). Owning more than 15% of the stent patent universe, Boston Scientific Scimed is the largest patent holder in the field. The program’s launch will immediately provide powerful insight into the patent landscape of the industry’s largest participant.

Additional patent collections will be released each week by assignee, including Abbott Cardiovascular, Endologix, Medtronic, Cook Medical, Advanced Cardiovascular, W.L. Gore, Bard, Medinol, Johnson & Johnson, and more. The complete pool of all patents classified in USPC 623/1.1 through 1.54 is expected to be available in Spring 2015.

The ClearstoneIP Platform

ClearstoneIP’s platform has been recognized for delivering a truly unique approach to patent analysis. For the first time, patent professionals can access a hierarchically organized record of technical elements that reflect actual claim coverage (as opposed to general patent disclosure). When a user selects elements that are not embodied by a product undergoing analysis, the application will automatically eliminate patents that require the selected element for infringement. With each mouse click, patents are removed from the results, eventually resulting in a manageable list of highly relevant patents for further review by the user. Initial test results comparing Clearstone Elements™ to conventional search methods have been staggering – with ClearstoneIP’s software yielding vast improvements in precision, reliability and speed.

ClearstoneIP is determined to map and organize the entire universe of patents in this manner. It has begun the process by focusing on medical devices, but this just the beginning.

Why Stents?

Patent litigation in the medical device arena generates some of the largest damages and settlements of any industry. The number of patent infringement lawsuits in the field is also sky-high, with stent-related actions notoriously common. Companies are often unaware of the risks they face because conventional patent search methods are simply not tailored for claims-based searching.

Using Clearstone Elements™ with the forthcoming stent database, companies can mitigate the risk of litigation by quickly ascertaining problematic patents based on what the claims actually cover. Many other benefits may also be realized through the program’s unique product-to-patent mapping capability, including determining licensing opportunities, evaluating potential patent acquisitions, and improving patent marking processes.

About ClearstoneIP

ClearstoneIP is a California-based company built to provide industry leaders and innovators with a truly revolutionary platform for conducting product clearance, freedom to operate, and patent infringement searches. ClearstoneIP was founded by a team of forward-thinking patent attorneys and software developers who believe that barriers to innovation can be overcome with innovation itself.

Share this:

Palo Alto, CA: ClearstoneIP LLC announced today the release of its debut product and the first elimination-based patent search and management platform – Clearstone Innovator. The application is expected to disrupt existing industry standards and conventional wisdom about patent clearance and other patent management activities by creating an entirely new analytical paradigm.

ClearstoneIP rejects the traditional notion that clearance searches ought to be carried out using the same methods applicable to prior art or validity searches. Instead, the Innovator search platform uniquely ties patents to their required claim elements and presents the elements in an intuitive and functional hierarchy. Searchers narrow the set of relevant patents by selecting elements that are not embodied by a product undergoing search. The software employs a patented method to eliminate patents that require the selected elements for infringement, resulting in a manageable short list of potentially relevant patents. The program also enables users to uniquely memorialize patent infringement analysis so that repeated analysis is avoided in subsequent searches.

The company believes that much of the problem with patent clearance relates to the excessive amount of search results, or “hits,” commonly retrieved with traditional (prior art-focused) search methods, such as those based on keywords, synonyms, and concept-mapping. These traditional methods are adept at amassing a large set of resultant patents, but do not help zero in on the most relevant results. In addition, conventional methods fail to take account of fundamental differences between validity searching and clearance searching – which include the recognition that patent disclosures are almost always very different in scope from patent claims. These differences are at the core of the Clearstone Innovator logic.

By inverting the traditional logic paradigm so that the focus is on features not embodied by a product being cleared, ClearstoneIP’s software cuts to the chase and enables complete clearance searches to be performed in a fraction of the time and cost, generally within one day. Clearstone Innovator also simplifies and uniquely enables ongoing patent portfolio and marking management.